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US Suggests New Legislation Proposal for Crypto Exemption from Securities Laws

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  • Stavros Georgiadis
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    In the US, actions have recently been taken to exclude digital assets from being defined as securities.

US Suggests New Legislation Proposal for Crypto Exemption from Securities Laws
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This challenging question, as we have mentioned before, is related to legislation and rules that are of high importance about the future price of major cryptocurrencies in 2019 and beyond. In the US, actions have recently been taken to exclude digital assets from being defined as securities.

Are cryptocurrencies securities or not?

The ‘Token Taxonomy Act of 2018’ is in practice an important amendment to the Securities Act of 1933 and the Securities Act of 1934. Some important highlights in the bill worth mentioned are the following:

“… Direct the Securities and Exchange Commission to enact certain regulatory changes regarding digital units secured through public key cryptography, to adjust taxation of virtual currencies held in individual retirement accounts, to create a tax exemption for exchanges of one virtual currency for another, to create a de minimis exemption from taxation for gains realized from the sale or exchange of virtual currency for other than cash, and for other purposes.”

Regulation will have an impact on crypto in 2019

It is no surprise that the wiser adoption of cryptocurrencies is based on two major business aspects:

  1. Regulation and transparent rules
  2. Business applications and solutions

The lack of regulatory clarity for initial coin offerings (ICOs) and digital currencies is prohibiting the expansion of cryptocurrencies in daily business solutions. As global current regulations appear to be vague, without any concise rules, large businesses and corporations still have very limited motivation to invest a large amount of capital in building blockchain solutions.

It is still very hard to argue that anytime soon there will a global regulation framework that will have common rules and guidance for the majority of countries that are leaders in blockchain technology.

Western Union is optimistic on the adoption of cryptocurrencies as a financial instrument

Western Union, one of the largest global non-bank money transmission companies, mentioned that they are ready for the adoption and acceptance of the blockchain technology.

“Cryptocurrency might become one more option for a way for assets to be exchanged between people and countries. If that happens, we would be ready to launch.”

Western Union has been reportedly testing Ripple as a potential cryptocurrency platform for business and financial transactions, with no decisions made yet on its usage. It is still unknown whether this idea will become a reality.

But the fact that a company which has a business model on sending money digitally is considering the adoption of blockchain technology may be interpreted as optimistic now for the future of cryptocurrencies. And a legislative decision making the business framework clearer for blockchain technology and ICOs would most probably help in their broader usage.

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About the author

Stavros Georgiadis - CFA Charterholder, Economist, Forex market trader, US stock market financial analyst.

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Federal Reserve System: Stablecoins Pose Potential Risks to Financial Stability

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  • Vladislav Sopov
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    According to its Financial Stability Report of November 2019, the Board of Governors has warned about the dangers of stablecoins.

Federal Reserve System: Stablecoins Pose Potential Risks to Financial Stability
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The Board of Governors of the U.S. Federal Reserve System have issued their monthly Financial Stability Report. This special report is dedicated to the profits and risks of "global stablecoins".

Stablecoins: Global System with So Many "Ifs"

First, the Federal Reserve admits to the numerous advantages that stablecoins present as a concept. It has been highlighed that stablecoins are "faster, cheaper, and more inclusive payments could complement existing payment systems". This is in comparison to cases where traditional financial institutions are sophisticated and poorly accessible. Stablecoins can also be managed to eliminate the volatility of cryptocurrencies, which is one of the borders for them to be utilized as the medium for exchange.

Therefore, the "global stablecoin initiatives" like Facebook's Libra can rapidly achieve cross-border adoption. However, the major threat for stablecoins is apparent - the "inability to convert in national currency". The loss of confidence in "pegging" the stablecoin to traditional assets can lead to a run, in which several holders will attempt to liquidate their stablecoins at the same time.

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This dramatic scenario may be caused by "poor design and governance", and can result in severe consequences for international economic activity, asset prices, and financial stability.

Transparency First

The Federal Reserve also outlined in its report that in many cases, stablecoins can be utilized for money laundering, terrorist financing, and other financial crimes. Therefore, the Federal Reserve would require operators of such systems to conduct their Due Diligence, as well as Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures to avoid any abuse. Moreover, the problems of disclosure policy and protecting investor data should be of paramount importance for stablecoin issuers:

Disclosures should clearly detail consumer and investor rights and protections, including whether the holder of the stablecoin has any rights to the underlying asset. Issuers should be transparent on how the stablecoin is tied to the underlying asset, has been said in the Report.

Last but not least, the report highlighted that the Federal Reserve, together with the Group of Seven, will closely monitor stablecoin developments as well as all the risks associated with it.

Have anyone ever invested in stablecoins? Do you prefer to use it, or to pay extra fees for fiat gateways? Tell us your story on Twitter!

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About the author

 Blockchain Analyst & Writer with scientific background. 5+ years in IT-analytics, 2+ years in blockhain. Worked in independent analysis (Crypto Briefing) as well as in start-ups (Swap.online, Monoreto, Attic Lab etc.)

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